Three months after rejecting a $14 billion plus takeover offer from US private equity Santos has gone on the takeover trail itself, buying Quadrant Energy for $US2.15 billion or $A2.9 billion.
Quadrant was formed in 2015 from the WA assets of US oil group Apache and is jointly owned by Brookfield Asset Management, Macquarie Capital, Wesfarmers and AMB Holdings.
The owners had explored a float of Quadrant but abandoned the move this year.
It is best known for its 80% stake in the recent Dorado oil strike off the northern WA coast.
According to the statement on Wednesday Santos will also make a contingent payment relating to the Dorado oil discovery and a royalty over all other future hydrocarbons produced in Quadrant’s Bedout Basin areas off the Pilbara.
Two of the main assets Quadrant operates, the Varanus Island and Devil Creek processing plants, are 45% owned by Santos.
With total ownership of these two plants and 29% of the BHP’s Macedon gas plant, the deal will make Santos a dominant player in the WA domestic gas market.
Figures released this week by minority partner Carnarvon Petroleum put Dorado’s contingent resources at 171 million barrels of oil plus gas.
Quadrant’s share of production in 2017 from its assets was 19 million barrels of oil equivalent (mmboe). It had 2P reserves of 220 mmboe at the end of that year.
The deal will increase Santos’ proven and probable reserves by 220 million barrels of oil equivalent by around 26% and its annual production levels by around 32%, or 19 million barrels of oil equivalent.
“This acquisition delivers increased ownership and operatorship of a high-quality portfolio of low cost, long-life conventional Western Australian natural gas assets which are well known to Santos, and importantly significantly strengthens Santos’ offshore operating capability,” Santos managing director Kevin Gallagher said.
“It is materially value-accretive for Santos shareholders and advances Santos’ aim to be Australia’s leading domestic natural gas supplier,” he said.
Santos said the takeover would be funded from existing cash resources and new debt facilities.
Wesfarmers said it would net $US170 million from the sale of 13.2% stake. The interest had been acquired for $US100 million.
Wesfarmers said it expected to report a pre-tax profit from the transaction of about US$98 million.
